General Trend:
- In early Asian trade, Brent Crude Futures rose over 18% (to above $71.60/bbl) after the Saturday attack on Saudi Arabia’s oil facilities
- On Sept 14th (Saturday), it was reported that Saudi Arabia had reportedly shut down about half of its oil production after drone attacks on two refineries, shut 5M bpd of production (5% of total global output)
- Most of the production shutdown is said to be a precautionary measure; Aramco officials hope to restore full production by Monday (press article from Sept 14th)
- However, it has since been reported that Saudi officials expect to restore ~one third of the lost oil production by the end of the day on Monday (Sept 16th)
- Oil prices have since pared some of their gains; US President Trump has said he has authorized the release of oil from the Strategic Petroleum Reserve (SPR), if needed (comments from 9/15)
- Hang Seng underperforms amid continued protests and weaker Chinese data; Mainland Chinese banks trade generally lower
- Hong Kong Exchanges declines over 2%, LSE’s board unanimously rejected the company’s takeover offer
- Tencent drops by more than 2% after making takeover offer for Bitauto Holdings
- South Korean chipmakers decline; China’s Tsinghua Unigroup planning to invest CNY800B (~$113B) on DRAM over the next 10-years (press)
- Equities in Indonesia drop over 2% on higher oil prices and increase in the tobacco excise tax
- Aussie metals recycling firm Sims Metal drops over 13% on profit warning, noted trade war is lowering demand for steel and aluminum
- Australian baby formula company Bellamy’s rises over 50%, received takeover offer from China’s Mengniu Dairy
- UAW voted to go on strike at GM, first national strike action at GM since 2007, went into effect at midnight Sept 16th
- China industrial production slowed further in Aug; China Premier Li said maintaining economic growth at 6% or more is ‘very difficult’
- China’s 50bps RRR cut that was announced on Sept 6th took effect on today’s session
- AUD/JPY weighed down by equity declines and weaker Chinese industrial production; RBA to release Sept minutes on tomorrow’s session, Aussie/China politics also on radar
- Aussie PM Morrison expected to join Trump for state dinner in DC later this week
- NZIER Economists lower FY19/20 GDP growth forecast for NZ, New Zealand is expected to release Q2 GDP on Sept 19th (Thursday)
- Emerging market currencies decline, bond yields rise as traders assess implications of oil price spike on inflation/inflation expectations
- US Treasury Futures rise on weaker equities and spike in oil prices; Upcoming central bank meetings in focus, US Fed is due to hold policy meeting on Sept 17-18th (Tues-Wed), BoJ to meet Sept 18-19th (Wed-Thursday)
- Lower-level China/US officials are expected to meet this week in Washington D.C. [date unknown], talks are expected to lay groundwork for the higher-level negotiations expected in early Oct
- Japanese markets return from holiday on Tuesday
Headlines/Economic Data
Australia/New Zealand
- ASX 200 opened +0.3%
- BAL.AU To be acquired by Mengniu Dairy for A$13.25/shr cash which includes A$0.60/shr special dividend
- SGM.AU Warns H1 to be materially lower y/y; ferrous and non-ferrous price declines having the biggest impact, trade war lowering demand for steel and aluminum
- (NZ) New Zealand Trade Min: FY18/19 primary exports +8.7% y/y; forecasts FY19/20 primary exports -0.5% y/y
- (AU) Australia Intelligence determined in Feb that China behind major cyberattack on Parliament; information was withheld to protect trade relations – Australia Press
Japan
- Nikkei 225 closed for holiday
- (JP) US to increase low-tariff quota for beef from Japan, exact details not given; Japan to abolish import tariffs on US wine in the next seven years – Japan Press
- (JP) US Pres Trump and Japan PM Abe to issue joint statement regarding the agreement not to hike tariffs on Japan autos – Japan Press
- (JP) Japan PM Abe approval rating 53%, -5ppt w/w after Cabinet reshuffle – Yomiuri poll
Korea
- Kospi opened +0.3%
- (KR) South Korea president Moon office: job growth is showing clear signs of improvement, with the government planning to roll out “preemptive” measures to help cushion the negative impact from the inevitable restructuring of some troubled businesses – Yonhap
- (KR) North Korea Leader Kim sends letter proposing President Trump visit Pyongyang
China/Hong Kong
- Hang Seng opened -0.5%; Shanghai Composite opened +0.4%
- (CN) China Premier Li: Maintaining economic growth at 6% is ‘very difficult;’ economy faces certain downward pressure due to slowing global growth, protectionism, and unilateralism – China Press
- (HK) Hong Kong monetary Authority (HKMA) Chief Chan: See no significant capital outflows amid protests; property price correction is not significant
- (CN) China National Bureau of Stats (NBS): Reiterates China will will increase counter cyclical adjustments; sees ‘significantly’ increasing external uncertainties , facing downward pressure; China has conditions to keep CPI within 3% target
- (HK) Protests in Hong Kong continue over the weekend for the 15th consecutive week, police use tear gas and water cannons as protesters use fuel bombs
- 388.HK China state media outlet People’s Daily praises LSE’s rebuff of HKEX’s offer; praises LSE’s relationship with Shanghai Stock Exchange; signals Beijing may disapprove of the deal
- (CN) China PBoC Open Market Operation (OMO): Skips for the 2nd consecutive session; Net drain CNY160B v CNY0B prior
- (CN) China PBOC sets Yuan Reference Rate: 7.0657 v 7.0846 prior
- (CN) CHINA AUG RETAIL SALES Y/Y: 7.5% V 7.9%E; YTD Y/Y: 8.2% V 8.3%E
- (CN) CHINA AUG INDUSTRIAL PRODUCTION Y/Y: 4.4% V 5.2%E; YTD Y/Y: 5.6% V 5.8%E; Aug Power output: 668.2B KWh, +1.7% y/y (record high)
- (CN) CHINA AUG FIXED URBAN ASSETS Y/Y: 5.5% V 5.7%E
- (CN) China Aug Property Investment YTD Y/Y: 10.5% v 10.6% prior
- (CN) China Aug Surveyed Jobless Rate: 5.2% v 5.3% prior
- (CN) China Finance Ministry (MOF): Plans CNY1.86B 3-year bond sale on Sept 17th, the operation is part of market-making operations
North America
- (US) President Trump: We are “locked and loaded” for a response on Saudi oil attack; want to hear from Saudi Arabia before any attack response; incorrect to say that he would meet with Iran with no conditions
- (US) US President Trump: Based on the attack on Saudi Arabia, which may have an impact on oil prices, I have authorized the release of oil from the Strategic Petroleum Reserve, if needed, in a to-be-determined amount sufficient to keep the markets well-supplied. I have also informed all appropriate agencies to expedite approvals of the oil pipelines currently in the permitting process in Texas and various other States – tweet
- GM UAW union rejects offer from General Motors, to go on strike starting at midnight; Unifor supports strike action, note the last major strike took place in Sept 2007, lasted 2 days before an agreement was reached
Europe
- (UK) Brexit Secretary Barclay suggests that the UK could stay in a standstill transition deal with EU until the end of 2022; If the transition is extended beyond the expected date of Dec 2020 then it would allow more time to reconvene the suspended Stormont assembly in Ireland, which would play a larger role in the oversight of any future deal struck
- (EU) EU officials deny UK PM Johnson’s claim that there has been “real signs of movement” and “a huge amount of progress is being made” on getting rid of the backstop – UK press
- (SA) Saudi Arabia has reportedly shut down about half of its oil production after drone attacks on two refineries; shuts 5M bpd of production (5% of total global output)
- (IR) Iran reiterates it is not behind drone attacks on Saudi Arabia oil facilities, as US is suggesting, thinks the US is seeking pretext to retaliate against Iran – US financial press
- (SA) Saudi Arabia officials: Expect to restore ~ one third of lost oil production by the end of the day Monday Sept 16th – press
- (UK) British Chamber of Commerce cuts 2019 GDP outlook to 1.2% (prior 1.3%; Cuts 2020 GDP to 0.8% (prior 1.0%); outlook assumes UK avoids a no deal Brexit
Levels as of 01:20ET
- Hang Seng -1.2%; Shanghai Composite -0.1%; Kospi +0.4%; Nikkei225 +1.1%; ASX 200 +0.1%
- Equity Futures: S&P500 -0.6%; Nasdaq100 -1.0%, Dax -0.7%; FTSE100 -0.5%
- EUR 1.1070-1.1087; JPY 107.51-107.92; AUD 0.6864-0.6884; NZD 0.5645-0.5700
- Commodity Futures: Gold +0.8% at $1,511/oz; Crude Oil +8.7% at $59.58/brl; Copper -1.2% at $2.67/lb
